House tax reform bill released with sweeping tax cuts (video)

In pursuit of the biggest transformation of the U.S. tax code in more than 30 years, House Republicans plan to permanently reduce the corporate tax rate from 35% to 20%. They also want to lower the number of individual income tax brackets and repeal the death tax starting in 2024, according to a detailed summary of the plan, released Thursday morning.

The Tax Cuts and Jobs Act will maintain the top individual tax rate at 39.6%, but it pushes the income threshold for that rate to $1 million for married couples.

The House Ways and Means Committee plans to consider the bill next week with the goal of signing it into law by Christmas and having most of it take effect in 2018.

To partly make up for the lost revenue, Republicans plan to limit the deductions individuals take for state and local tax payments to $10,000 while eliminating the deduction for state income taxes.

Revised several times in the days prior to its release, the tax bill includes incentives for business investment and a new $300 per person credit for filers, their spouses and non-child dependents such as college students. But those incentives will lapse after five years unless Congress moves to keep them.

Nevertheless, the proposed budget agreed upon by the Senate and the House constrains the tax overhaul to a cost of $1.5 trillion over a decade.

“We’ll be in listening mode all throughout the code,” said Ways and Means Chairman Kevin Brady (R-Texas), author of the bill. “We are following the Reagan example here. Go bold. Listen. Make adjustments, but keep the process going forward.”

The plan nearly doubles the standard deduction, pushes people away from itemizing their deductions, lowers business tax rates, repeals the alternative minimum tax, and eliminates many tax credits, deductions, and exclusions, such as breaks for moving expenses and employee achievement awards, according to a report in the Wall Street Journal on Thursday.

The number of individual tax brackets will be reduced, from seven to four: 12%, 25%, 35% and 39.6%. For married couples, the 25% rate starts at $90,000, the 35% rate starts at $260,000 and the top rate starts at $1 million. For individuals, those breakpoints are $45,000, $200,000 and $500,000.

The new 12% tax rate covers more income than the current 10% and 15% brackets do, which will lower taxes for many middle-income households. But many upper-income households could face a higher marginal tax rate under the House bill, which pushes some from a 33% bracket into 35%. However, full estimates aren’t yet available.

Middle-class families will see a huge change in their tax bills, according to the WSJ report, which explained:

Under current law, in 2018, a married couple with two children making $60,000 would get a $13,000 standard deduction and four personal exemptions each worth $4,150. That means they would pay taxes on $30,400 of taxable income. Their base tax bill of $3,608 would be reduced by $2,000 in child tax credits for a total income tax of $1,608.

Under the House plan, the same married couple with two children would get $3,800 in tax credits, $3,200 for the two children and $600 for the two parents. The same family would get a $24,400 standard deduction but no exemptions, for $35,600 of taxable income. Their base tax bill of $4,272 would be reduced by the $3,800 in credits for a total income tax of $472.

The House bill also expands the child credit for the upper-middle class. Currently, the credit starts phasing out for individuals with incomes above $75,000 and married couples with incomes above $110,000. Under the House bill, those thresholds move up to $115,000 and $230,000.

WATCH LIVE-STREAMING VIDEO AS REPUBLICAN HOUSE MEMBERS ANNOUNCE RELEASE OF THEIR NEW TAX PROPOSAL.